Governor Rick Perry Unveils 20% Flat Tax Plan

Posted by Jim Hoft on Monday, October 24, 2011, 11:12 PM

Governor Rick Perry unveiled his 20% flat tax and spending plan tonight. The plan will give individuals the option of paying a 20% flat-rate income tax. It will also cap federal spending at 18% of GDP. Another selling point – the simple 20% flat tax will allow Americans to file their taxes on a postcard, saving up to $483 billion in compliance costs.Sounds good.

Republican presidential candidate Rick Perry unveiled a sweeping economic agenda Monday, highlighted by a plan to level a voluntary 20 percent “flat tax” on all taxpayers who will accept it in place of what they’re paying now.

The plan, outlined in a Wall Street Journal op-ed column a day before the Texas governor was set to announce it in South Carolina, also calls for capping federal spending at 18 percent of the country’s GDP while allowing younger earners to privatize their Social Security accounts — a controversial proposal that echoes President George W. Bush’s failed 2005 attempt to overhaul the retirement program.

But the most significant feature of Perry’s plan is his call for a flat tax rate of 20 percent. Taxpayers who don’t want to pay a 20 percent flat income tax, he said, can keep their current rate.Current marginal income tax rates range from 10 percent to 35 percent, depending on taxpayers’ income.

Perry offers several proposals that appear designed to sweeten the offer — and to counter criticism that the flat tax is regressive, taking a proportionally bigger bite from smaller incomes. His plan would preserve popular deductions for mortgage interest and donations to charity for households earning less than $500,000 a year. It would increase the standard deduction to $12,500.

But Perry would eliminate other tax breaks. He argues that a streamed-down tax code (so simple, he says taxpayers can file on a postcard), along with spending cuts and entitlement changes, will stimulate the economy.

bg commented:

[For instance, the tax initially wasn’t levied on businesses with total
revenue of less than $300,000. But at the request of Mr. Perry, that
threshold was raised to $1 million through 2014. That has lowered
taxes for 40,000 small businesses, Ms. Nashed said. The governor’s
philosophy is that “there’s no such thing as a tax that doesn’t tax
enough,” she said.

[..]

As a result, Texas relies heavily on its sales tax, through which
poorer families pay a larger share of their income, though the
state does exempt groceries, medications and some other items.

The poorest 20% of Texans paid an average of 6% of their income in
sales tax, while the top fifth—households with an income of roughly
more than $126,000—paid 1.3%, according to an analysis from the
office of the Texas Comptroller, the independently elected steward
of the state’s finances.

“Texas is not a low-tax state if you’re low-income,” Mr. McCown said.]

Molon Labe commented:

Without a Constitutional Amendment this solves zero. Those who don’t pay will not opt for it. Most of the middle class will be squeezed. The rich get a tax break. A flat 15% sales tax is what is needed. No deductions.

No taxes on divideneds under 10,000 total, then 15% rate kicks in. No estate taxes on estates of under 5 million. End of all fees, and federal special taxes.

Molon Labe commented:

Estragon commented:

Nearly half of Americans with income pay no tax on it beyond payroll taxes (which carry their own expected benefits). Everyone except the truly poor should have some skin in the game.

So this “flat tax” isn’t very flat if it allows people to continue paying nothing while reaping benefits. And the fact it can be filed on a postcard doesn’t help if you still have to pay an accountant to figure out whether the current system or the flat tax is better in your situation.

Forbes’ original Flat Tax proposal was a lot closer to what we need.

Any reform plan needs to end the practice of rebating tax credits to those who paid no tax. The limit of your refund should be the withholding tax you paid. Allow credits to carry forward for businesses, but the tax system should not be operating as another welfare system, which it does with the EITC and other credits which allow people to get back more than they paid.

Diamond Girl commented:

Barb commented:

All Texans pay a 8.5% state sales tax, we do not have a state tax. Any one will win over BO! We have NOT seen what our taxes will be if OB wins a second term… TRY maybe 70%-80% federal tax on us with all the trillions he is spending or maybe our country will just collapse and we will have nothing.

Rob commented:

Wow… no Perry fans here…. Perry 2012. The system as it is, is imploding. Vote Dem for more pain or Romney for RINO squish… jUst GOP in charge of big government.

Debates? REally? It won’t matter one bit. The MSM will shape whatever happens. STRAW MAN argument. It matters not who the GOP nominates against the President. Just like with McCain, they will build ‘em up, and once a RINO is picked, they will eviscerate him. Might as well pick a conservative and focus on a larger House majority; taking the Senate, and installing a true conservative in the WH what opposes what we have now.

bg commented:

[In 1996, Steve Forbes, multimillionaire son of magazine publisher Malcolm Forbes, entered the Republican presidential contest. In circumstances that could be a template for Cain’s campaign, the political neophyte challenged a vulnerable Democratic incumbent whose party had suffered steep losses in the preceding midterm elections.

Like his predecessors, Forbes billed himself as a common-sensical outsider and offered a simple, compelling prescription for the nation’s woes. He sought to scrap the Internal Revenue Service, eliminate the complex federal Tax Code and replace it with a flat 17 percent tax on income. Except for personal allowances, which would exempt low-income taxpayers from any obligation, all economic activity would be treated equally. A simple postcard would replace all tax forms.]

bg commented:

Sandy commented:

Debating is just rope-a-dope. Those who can look sincere while talking gobble-di-gook usually come out on top. But Perry is a successful governor at a time when most states are failing — so when he speaks I listen.

Ed Wallis commented:

Another Perry FAIL. Sounds good until you realize he allows anyone who prefers to “opt out” (sound familiar?!?) and stay on the current tax code…YOU KNOW…like th 47% of us who CURRENTLY PAY NO FEDERAL TAXES.

workingclass artist commented:

Perry’s plan better than Cain’s nein nein nein which will never get passed in Congress. It’s a transitional tax (reform) plan which will boost the economy, addresses SS# option for the youngsters & identifies the elephant of spending.
Perry will most likely introduce a spending cuts package next…

Perry has stared down the legislature to cut spending and balanced the state budget 6 times, the last session preserving the rainy day fund from depletion. The rainy day fund will be back up to $7 Billion by 2013 due to sales tax receipts moving back to 2008 levels this year.